Strategic CFO for Startups: When and Why You Need One

Strategic CFOs guide startups through critical growth stages, underscoring their importance. While your startup leaders are likely able to handle basic accounting and bookkeeping in the early days of your startup, as your startup grows and evolves, its financial needs are going to become more complex.

A good strategic CFO can develop financial strategies, manage funding and navigate complicated financial matters as it pertains to scaling. What’s more, a good CFO can also ensure that you stay compliant with accounting best practices and industry regulations.

Graphite Financial has provided high-level financial services for startups since 2016. Thanks to our wealth of industry experience and expertise, our professionals are able to tailor solutions unique to your startup.

When Is the Right Time to Bring on a CFO?

When’s the right time to work with a CFO partner? While there’s no real bad time, certain times make more sense than others. Here’s a look:

• When preparing for Series A or B fundraising
• When there’s increasing revenue complexity
• If your startup is experiencing rapid growth
• If there are more than 25 employees at your startup

If you wait too long to bring on a CFO, you could miss opportunities for strategic growth, encounter financial instability or lack needed financial leadership during some of the most critical periods of your startup.

Signs Your Startup Has Outgrown Basic Financial Management

Think your startup has outgrown basic financial management? Some of the tell-tale signs that are indicative of this include when you need to meet investor reporting requirements, if you need to be more effective with cash flow management or simply if your startup’s leadership can no longer adequately handle its financial oversight needs.

These challenges directly impact fundraising and operational efficiency, underscoring the importance of working with the right financial professional.

The Strategic Value a CFO Brings to Your Startup

A CFO brings a significant level of value to your startup, especially when it comes to serving it beyond basic financial management and bookkeeping. Some of the key tasks a CFO can help your startup with include:

• Fundraising preparedness
• Investor relations
• Financial modeling
• Strategic financial planning
• Budgeting and managing cash flow
• Risk management and compliance

CFOs can also help improve your startup’s valuation by telling a story through your startup’s financial metrics to help it appeal more to investors. Another key benefit of a CFO is that the role can grow and scale as your startup evolves and moves through the different funding stages.

CFO vs. VP of Finance vs. Controller: Understanding the Differences

Aside from the CFO, some other financial roles often present in startups are VPs of Finance and Controllers. However, these positions tend to have different responsibilities.

For instance, a VP of Finance works more in the day-to-day of a startup’s financial operations, with tasks that include financial reporting and budgeting. VPs of Finance also often report to the CFO in a typical business structure. Controllers report to VPs of Finance or Senior Financial Professionals and work mainly on maintaining accurate financial records.

CFOs, conversely, are the highest-ranking financial professionals and focus more on long-term and bigger-picture financial goals and strategy. They tend to report directly to the CEO or the highest leadership official.

Is a Fractional CFO Right for Your Startup?

Rather than hire a CFO in-house, another option is to work with a fractional CFO. A fractional CFO is a professional who works externally of your startup and provides services on a part-time, often on-demand basis. Most startups don’t yet require a full-time CFO and can save a considerable amount of money by working with a partner that still provides a high level of financial expertise when needed.

What’s more, fractional CFOs can scale and evolve with your startup as it grows. At Graphite, we offer multiple service plans to best suit the current needs of your startup.

How to Maximize Value from a Fractional CFO Relationship

Getting the most out of your startup’s fractional CFO relationship all comes down to outlining expectations. As you’re onboarding your partner, consider the following:

• Outline meeting and communication cadences
• Set goals and define responsibilities
• Identify KPIs and work together to meet them
• Work to ensure that the fractional CFO partner is serving as an extension of your startup

Essential Qualifications to Look for in a Startup CFO

What makes a good startup CFO? You’ll want to start by looking for a financial professional who has experience in the industry your startup is operating in and can comply with any unique requirements in addition to financial compliance. Other qualifications you’ll want to look for include:

• Fundraising experience
• Investor communications skills
• Strategic thinking skills
• Financial leadership skills

Red Flags to Watch For During the CFO Hiring Process

Just as you’re weighing certain qualifications as you hire a CFO, there are also certain red flags that you’ll want to be wary of during the process. Some of these include:

• Limited financial experience
• Inconsistent professional history
• Indications of non-compliance or ethical issues
• Core values that don’t align with your startup

How to Find the Right CFO for Your Startup

Look for the right CFO for your startup in the same way that you’d look to hire any other professional or strategic partner. Utilize your professional networks to see if you can identify candidates or consider working with a recruiter for such purposes. Additionally, you can work with a financial services company to pair your startup with the right fractional CFO partner.

Industry-Specific CFO Expertise: Why It Matters

A CFO can provide more value to your startup if they have experience in the industry your startup operates in. Industry knowledge can help accelerate the development of a financial strategy and also help with meeting industry-specific regulatory compliance and financial requirements.

From SaaS to eComm to HealthTech and more, Graphite can assign the right fractional CFO to your startup to add more value to the relationship and meet industry-specific needs.

Partnering With Graphite: The Strategic CFO Solution

As a leading provider of financial services for startups since 2016, we’ve served hundreds of startups as their strategic CFO partner. Our professionals have experience in every industry, and we make it a point to pair the right financial professional with your startup to provide the best level of service possible and tailor solutions to meet your startup’s unique needs.

Taking Your Startup to the Next Level

If you’re ready to take your financial management to new heights, contact Graphite today to schedule a free consultation. We look forward to partnering with you and helping you chart a path to strategic, sustainable future growth. Contact us today for more information and to get started.

FAQs

When is the right time for my startup to bring on a CFO?

Consider bringing on a CFO when preparing for Series A or B fundraising, when there’s increasing revenue complexity, if your startup is experiencing rapid growth or if there are more than 25 employees at your startup. If you wait too long to bring on a CFO, you could miss opportunities for strategic financial guidance, encounter financial risks or lack needed financial leadership during some of the most critical periods of your startup.

What’s the difference between a fractional CFO and a full-time CFO?

A fractional CFO is a professional who works externally of your startup and provides services on a part-time, often on-demand basis, normally at a significant cost savings compared to a full-time CFO. Full-time CFOs work directly for your startup.

How does a strategic CFO impact fundraising success?

Strategic CFOs help develop financial projections, manage investor relations and align financial strategy with growth goals.

What specific financial metrics should my CFO be tracking at each growth stage?

Metrics to track include revenue growth rate, cash flow, customer acquisition cost, cash runway and gross profit margin, among others.

How much should our startup budget for CFO services?

This depends on what stage your startup is in and what its financial needs are. Most startups have limited resources and capital, which makes hiring a full-time CFO difficult. That’s where a fractional CFO relationship can be beneficial. At Graphite, packages start at $1,250 per month and can scale according to your startup’s needs.

Can our startup work with both a fractional CFO and an in-house finance team?

Yes, fractional CFO services can work in tandem with an in-house financial team. In fact, it can be beneficial for an in-house team to receive perspective from an external professional.

What industry experience should we prioritize when hiring a CFO?

In addition to ensuring a CFO has experience in your startup’s market of operation, look for fundraising experience, investor communications skills, strategic thinking skills and financial leadership skills.

How can a CFO help prepare our startup for an exit or acquisition?

A CFO can help prepare for exit or acquisition by focusing on its financial readiness and building a strong financial foundation.